Textron(TXT) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q2 2022 were $3.2 billion, essentially flat compared to the same quarter last year [5] - Segment profit increased to$303 million, up $14 million from Q2 2021 [5] - Net income per share rose to$1.00 from $0.81 in the previous year [5] - Manufacturing cash flow before pension contributions was$309 million, down $200 million from Q2 2021 [5][14] Business Line Data and Key Metrics Changes Textron Aviation - Revenues increased to$1.3 billion, up $123 million from Q2 2021, driven by higher aircraft and aftermarket volume [12] - Segment profit rose to$155 million, up $59 million year-over-year [12] - Backlog at the end of the quarter was$5.8 billion [12] Bell - Revenues decreased to $687 million, down$204 million from last year, primarily due to lower military revenues [13] - Segment profit fell to $63 million, down$47 million from the previous year [13] - Backlog ended at $5.3 billion [13] Textron Systems - Revenues were$293 million, down $40 million from last year, reflecting lower volume due to the US Army's withdrawal from Afghanistan [13] - Segment profit decreased to$42 million, down $6 million year-over-year [13] - Backlog was$2.1 billion at the end of the quarter [13] Industrial - Revenues increased to $871 million, up$77 million from last year, driven by higher pricing and volume in specialized vehicles [14] - Segment profit rose to $41 million, up$9 million from Q2 2021 [14] Textron eAviation - Revenues were $5 million with a segment loss of$8 million [14] Market Data and Key Metrics Changes - Aviation segment saw strong demand with a backlog growth of $700 million, totaling$5.8 billion [6] - Bell's backlog increased by $500 million in Q2 [8] - Textron Systems received a$354 million contract for the production of ammunition [9] Company Strategy and Development Direction - The company is focused on ramping production in aviation to meet strong demand, despite supply chain challenges [17] - Investment in Future Vertical Lift programs is expected to continue, with a contract announcement anticipated in October [8] - The acquisition of PIPISTREL aims to enhance Textron's capabilities in electrically powered aircraft and sustainable aviation solutions [10][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain disruptions and labor shortages but expressed confidence in the company's resilience and performance [11] - The outlook for the second half of the year remains cautious, with expectations of continued headwinds but strong performance in aviation and industrial segments [17][19] - Management reiterated earnings per share guidance of $3.80 to$4.00 and increased cash flow guidance to $800 million to$900 million [15] Other Important Information - The company repurchased 4.4 million shares, returning $282 million to shareholders [15] - Significant cash tax payments were noted due to changes in R&D tax treatment [14] Q&A Session Summary Question: Supply chain headwinds and guidance for the year - Management acknowledged supply chain challenges but maintained that Textron Aviation's performance would remain strong, with some revenue misses expected [17] Question: Delinquency in finance segment - Management reassured that the finance segment is performing well despite a rise in delinquency [25] Question: Backlog management and production ramp - Management indicated strong demand and backlog growth, with efforts to ramp production while managing supply chain issues [27][29] Question: Confidence in FLRAA contract announcement - Management expressed confidence in an October announcement based on communications with the Army [31] Question: Working capital and pension thoughts for '23 - Management expects good working capital performance and potential tailwinds from pension in 2023 [36] Question: Corporate expenses and adjustments in Bell - Management explained lower corporate expenses were due to share price impacts and noted unfavorable program adjustments in Bell [38][40] Question: General aviation demand trends - Management reported strong demand in the business jet market, with increased international activity [42] Question: Engine supply issues - Management confirmed that engine supply issues are impacting deliveries but are being actively managed [80] Question: Pricing and inflation protections - Management stated that pricing strategies have incorporated inflation expectations, providing adequate protection [83] Question: Future margin expectations - Management anticipates continued positive margin progression, supported by a strong backlog and improved cost structure [86]